Alien Opens RFID Tag Plant, Releases Gen2 Chip

Alien Technology this week made four announcements that together represent the company's most assertive public move since it came out of the legally-mandated quiet period triggered by the IPO attempt earlier this year. The two major announcements were the opening of its North Dakota tag manufacturing facility and the introduction of its Gen2 chip product.

October 11, 2006—Alien Technology this week made four announcements that together represent the company's most assertive public move since it came out of the legally-mandated quiet period triggered by the IPO attempt earlier this year. The announcements were:

The opening of the high-volume RFID inlay manufacturing facility in Fargo, North Dakota (announcement)

The Fargo ribbon-cutting is a major event for Alien, which has long positioned itself as a high-volume, low-cost provider of RFID inlays. The 48,000 square foot facility greatly expands the company's inlay production capacity. The plant can currently produce two billion inlays annually; that number will rise to ten billion once it is fully equipped.

With Fargo operational, Alien's inlay manufacturing chain goes like this: Silicon is processed in Fargo using what's called the Micro Electronic Mechanical System (MEMS). Dies are removed from the silicon wafers using a proprietary process that the company says allows it to obtain 15% to 20% more RFID chips per wafer than competing methods. Once the silicon chips are processed, they are shipped to the company's California facilities, where they are packaged into straps using Fluidic Self Assembly (FSA), another proprietary process that Alien has long cited as a key competitive advantage. (According to what Alien told RFID Update, 125 million straps have been produced using FSA to date, and 200 million will have been produced by December.) Rolls of the finished straps are then shipped back to Fargo, where they undergo High Speed Strap Attach (HiSAM) to convert them into the final product, RFID inlays.

In addition to its manufacturing process, Alien is also touting the capabilities of its new Gen2 silicon. According to the company, the chip is as much as two decibels more sensitive than competing products, which can result in up to 30% longer read ranges. High sensitivity can mean more reliable performance, and also that smaller tag antennas can be used in certain applications, which can bring down overall tag cost.

The other advancement Alien has promoted is the chip's write speed; the memory can be encoded with data in a single command cycle. The result of faster data encoding, according to Alien, is better integration with high speed manufacturing and labeling processes.

The introduction of its Gen2 silicon chip is a major event for Alien. By using its own silicon, the company will no longer use competitor Impinj's silicon in its inlays. Alien says that by the end of the first quarter of 2007, it will have transitioned completely to the use of its own Gen2 chips for its inlays.

The company uses a "fabless" model of chip manufacturing, which means that it designs the chips but outsources the actual silicon production to a third-party foundry (in Alien's case, Israeli Tower Semiconductor).

Alien's new Gen2 chip is good news for the industry, as it brings the number of Gen2 silicon providers to five. Impinj, NXP (formerly Philips Semiconductors), STMicroelectronics, and Texas Instruments are the others. The increased competition in the Gen2 chip space is expected to result in constant improvements to Gen2 tag performance, performance that is already widely praised by systems integrators and end users (see Recap of the RFID Investor Conference, Part 2).

In addition to its new silicon, Alien has introduced a number of new inlays. Three of them, dubbed World Tags, operate in the 860-960 MHz frequency band and are aimed at cross-region use. Due to the varying radio frequency regulations from country to country and region to region, inlays are traditionally optimized for a particular geography. The World Tags, by contrast, are specially designed for deployment across the globe, from the Americas to Europe to Asia to Africa. "The use of Alien World Tags helps ensure that what works at the point of origin, also works at the point of destination and all points in between," said Keith McDonald, Alien's senior vice president of sales and marketing. The three World Tags are the M Tag, the Castle Tag, and the 2x2 Tag. The M Tag is optimized for plastic reusable containers, the Castle Tag for corrugate packaging and 3-inch labels, and the 2x2 Tag for apparel and baggage tag applications.

Alien also introduced two small inlays for use in the Americas and Asia. The Mini-Squiggle is targeted at item-level applications, while the 1x1 is designed for plastic packaging like that used for pill bottles.

All of the new inlays are available now in commercial quantities.

Alien's last announcement is the signing of supply agreements with six (unnamed) label converters. (Recall that label converters are the companies that take inlays from the likes of Alien or Raflatac or Avery Dennison and add stock face, liner, plastic sheathing, adhesive, and whatever else necessary to make the inlay a usable tag. Typically end users purchase RFID tags from label converters, not directly from the inlay manufacturer. As such, label converters represent inlay manufacturers' primary sales channel.) Combined, Alien's new supply agreements could amount to a total of 840 million Gen2 inlays, which will include inlays based on the new Gen2 chip.

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